In recent times, the IRS has intensified its efforts to combat questionable Employee Retention Credit (ERC) claims, issuing more than 20,000 disallowance letters to businesses. This article delves into the highlights of these disallowance letters and provides essential information on navigating the financial aspects of returning to work for retirees.
Disallowance of ERC Claims
Initial ERC Claim Disallowance Letters Issued
The IRS has taken a proactive stance by sending out disallowance letters to more than 20,000 businesses. These letters target claims made by businesses that either did not exist or lacked paid employees during the eligibility period (March 13, 2020, to December 31, 2021). This preemptive measure aims to identify ineligible claims before they are paid.
Dubious TV Promotions and Claim Withdrawal Process
A prior warning was issued on September 29th, cautioning business owners against aggressive TV marketing related to ERC claims. Subsequently, a November 9th article outlined a procedure for those who made ineligible claims to withdraw them and avoid potential issues with the IRS. The disallowance letters play a crucial role in preventing incorrect refunds from going to ERC promoters.
How These Letters Help Taxpayers
The disallowance letters serve a dual purpose:
Enforcement Activities and Future Plans
These disallowance letters are part of the IRS’s broader enforcement activities, with plans for additional letters in the future. The IRS continues to caution taxpayers against aggressive maneuvers by marketers and scammers in the ERC space. However, those engaged in fraudulent activities may face potential criminal investigation and prosecution.
Financial Planning for Returning Retirees
Contributing to Your Nest Egg
Returning to work post-retirement offers an opportunity to contribute to an employer’s retirement plan, such as a 401(k) or 403(b). Regardless of age, contributions can be made to grow retirement savings and potentially reduce taxable income. Considerations for traditional and Roth IRAs are also outlined, emphasizing the importance of consulting a tax professional.
RMDs Made Simple
Returning to work may allow for the delay of Required Minimum Distributions (RMDs) from a current employer’s 401(k) until April 1 of the year after retirement. Complex decisions, such as rolling over old 401(k)s or IRAs, are discussed, highlighting the need for consultation with a financial advisor.
Fine-Tuning Your Financial Mix
Additional income from returning to work provides an opportunity to reassess investment portfolios. Considerations include adjusting asset allocation, rebalancing portfolios, or making catch-up contributions to retirement accounts.
Pensions and Returns, Social Security, and Taxes
Returning to work may impact pension benefits, and retirees are advised to understand specific rules from pension plan providers. The article delves into the effects on Social Security benefits and the tax implications based on combined income. Awareness of Medicare premium increases is emphasized, considering the impact on additional income.
Planning for the Unexpected
Returning to work after retirement is a rewarding experience, but planning for unexpected changes is crucial. This includes reviewing insurance coverage, updating estate plans, and understanding the potential impact of increased income on tax brackets.
Staying Informed and Making Informed Decisions
As the IRS takes decisive actions to combat ERC fraud, businesses and retirees must stay informed to navigate these changes effectively. Whether facing disallowance letters or contemplating a return to work, understanding the implications, and seeking professional advice can make a significant difference. For businesses with ERC claims, the IRS’s New Voluntary Disclosure Program provides an opportunity to rectify erroneous claims. Retirees returning to work are encouraged to assess the financial landscape and make informed decisions to ensure a smooth transition into their next chapter.
In conclusion, staying informed about these updates and making well-informed decisions can contribute to a smoother financial journey. If you have submitted an ERC claim and need assistance, please contact our office for a review or help with the withdrawal process.
Thank you for your attention, and we remain committed to supporting you in your financial endeavors.